In the Westminster jungle, David Laws is one of a species now almost extinct –
a Liberal Democrat popular with Tories.

When the Coalition was formed in May 2010 many Conservatives looked on Mr Laws as a man they could do business with – a former City high-flyer who understood the need for austerity, public-sector reform, low taxes and policies that foster economic growth.

But after just 17 days as Chief Secretary to the Treasury, Mr Laws resigned over an expenses scandal that posed as many questions about his judgment as it did his private life.

Now this bright, personable and erudite Yeovil MP is widely tipped to return to front-bench politics in the Cabinet reshuffle expected in the autumn.

Today, in an interview with The Sunday Telegraph, Mr Laws calls for deeper public spending cuts, lower taxes and more radical public sector reform.

His sexuality made public by the revelations about his expense claims, he also weighs into the row over Government plans to introduce same-sex marriage, while criticising the proposed shake-up of GCSEs unveiled last week by Michael Gove, the Education Secretary.

Mr Laws talks of his resignation as a “multiple car crash” that has ultimately made him “wiser” and even “happier”. He even reveals which Conservative minister was “very supportive” as he tried to rebuild his life.

The public finances

This week the Institute of Economic Affairs, the right-of-centre think tank, will publish an article by Mr Laws which calls for deeper cuts to public spending and tax – even for the wealthy.

It is an interesting place for Mr Laws to resurface. The inspiration for the institute’s creation came from Friedrich Hayek, the favourite economist of Lady Thatcher.

In his paper, Mr Laws argues that the great names of Liberalism – William Gladstone, David Lloyd-George, Adam Smith and John Maynard Keynes – would be “shocked” that more than 40% of the economy is now accounted for by the public sector.

“We are going to have to see a shrinking of the state share of the economy until it is back into kilter with the amount of tax people are prepared to be pay,” he says.

Only health, education and pension spending can be protected from this, he argues. All other areas of state spending should fall.

It’s an agenda that will be music to the ears of many Tories, but many Lib Dems will surely be appalled by idea of one of their senior figures calling for years more of cuts.

“Future UK governments should consider a further substantial rise in the personal tax allowance, along with lower marginal tax rates of tax at all income levels,” he writes in the IEA article.

“The implication of the state spending 40% of national income is that there is likely to be too much resource misallocation and too much waste and inefficiency.”

He also talks boldly of radical public sector reform, citing Devon and Somerset’s fire authorities, which have merged and now sell training courses to external clients.

“That is a great example of a public sector body that has cuts costs and begun generating their own revenues,” he says, adding that many parts of the public sector could stop thinking of themselves as “cost centres” and begin to earn income, thereby lowering their costs to the taxpayer.

“We need to put in place a culture where parts of the public sector who want to innovate in such a way are free to do so.”

Boosting economic growth

Two weeks ago George Osborne, the Chancellor, wrote in The Sunday Telegraph that the ongoing debt crisis in Eurozone is “killing” the UK’s recovery. It is not a view Mr Laws shares.

“I don’t think Europe has killed the recovery or is killing the recovery,” he says, emphasising that last year’s rises in the price of other vital commodities also played a large part.

“It is true that when we started the coalition we expected gale force winds, but what we have ended up with is a hurricane that is affecting the whole world economy.”

That is certainly true. No mainstream independent economic forecaster predicted just how dramatic the eurozone debt crisis would become or how anaemic economic growth would be last year and this year.

However, economists and business figures might have expected that the Coalition would unveil more pro-growth policies once in office. Mr Laws says that the there will be more to stimulate growth in the months ahead, citing more financial stimulus from the Bank of England announced earlier this month.

“It is crucial that we ratchet up the action that we are taking to promote growth,” he says. “But this does not mean U-turning on cuts or spending taxpayers’ money in an old-fashioned way of handing out taxpayers’ money to business.”

Instead he favours more imaginative solutions, such as harnessing money locked up in corporate balance sheets or in pension funds to finance a house-building and infrastructure boom.

On Coalition life

Tensions between MPs in the two Coalition parties intensified after a Parliamentary vote earlier this month pushing for an investigation into Jeremy Hunt’s handling of News Corporation’s bid to take control of BSkyB, the broadcaster.

Lib Dem MPs abstained from the vote – a stance that infuriated many Tory backbenchers. Many Tories now see derailing the proposed reforms of the House of Lords championed by Nick Clegg as fitting revenge for their Coalition partners’ treatment of the Culture Secretary.

There are a range of other issues which suggest tension between the two parties will build over the coming months.

Nevertheless, Mr Laws argues that the Conservatives and Lib Dems remains a “model” of how coalitions can work. Despite this, he says, there may be greater friction over the next three years.

“Both Coalition parties need to be more relaxed than they were in the first year about acknowledging that there are differences,” he says. “If you try and choke off these [disagreements] you get supporters who feel we’re not standing up for them.”

“If you don’t have a tolerance for difference then they are released in a more violent way.”

On education

He adds his name to the growing group of Lib Dem MPs opposed to plans outlined by Mr Gove last week to axe GCSEs and bring back O-levels and with them CSEs, a second division qualification to be taken by the less able.

The proposals have angered many Lib Dems, including the party’s leader, who fears it will create a “two-tier” system.

“It’s not just that it’s two-tier – the old CSEs were not very good qualifications,” Mr Laws says, adding that there is a real danger that those on these lesser course will be left to coast. He also doubts CSEs will be good enough for a 21st century economy.

“We need to be looking to stretch people at that age – not take the pressure off.”

On gay marriage

Mr Gove’s education reforms are not the only tension over Coalition policy. The Government plan to introduce same-sex marriage by 2015 is as strongly opposed on Tory benches as it is supported amongst Lib Dems.

Philip Hammond, the Defence Secretary, has said that it should not be a priority for the Government, while Owen Paterson, the Northern Ireland Secretary, has said he would oppose the legislation when it comes to a Commons vote.

Mr Laws takes a similar stance to Nick Herbert, the Tory policing minister, another openly gay politician, who sees rights to same-sex marriage as a matter of “equality”.

“I am very strongly in favour,” says Mr Laws. “It is sending out the signal to society that gay people deserve just as much respect. In no way do I think it undermines the institution of marriage.

“I would like to see more people get married. I think it is good for young people to be brought up in a stable environment. Extending that right to a very limited proportion of the population is very important.”

Raised as a Catholic himself, he says he is “very, very sad” at the fiercely-worded opposition taken by leaders of the Catholic Church over the Government’s proposals.

Earlier this year, Cardinal Keith O’Brien, the leader of the Catholic Church in Scotland, says the proposals to allow same-sex unions were “madness” and a “grotesque subversion of a universally accepted human right”.

Mr Laws accuses the Catholic leaders of “alienating” their church from society by polarising the debate in such a way.

“I don’t think marriage is the property of any one religion,” he says. “I think it is the property of society and it for us in society to collectively decide what it means.”

Backbench exile

Mr Laws resigned as a minister in late May 2010, after he was found to have claimed £40,000 of public money to rent a room in a house owned by his lover, James Lundie.

Members have been banned from “leasing accommodation from a partner” at the taxpayer’s expense since 2006.

“It is frustrating to be a Liberal Democrat though years of relative irrelevance, then find a coalition comes along, be in an important role for a very brief period – and then not be,” he says.

He regrets making the expense claims, the revelation of which obliged him to confirm he is homosexual – something he had kept secret even from his mother.

Friends of the MP were saddened, but also astonished, by the scandal. To a man whose has a personal wealth estimated at several million pounds, £40,000 would seem a trivial sum to jeopardise his political career.

This is certainly not a man who appears to be ostentatious of flashy with his money. His office, which overlooks the Treasury building, is Spartan and simply-furnished. The walls are bare apart from a 33-year-old map of the world. He is still getting to grips with his iPhone and admits to being a “bit of Luddite”.

“It was a very difficult thing,” he says of the scandal. “Quite often politicians have single car crashes which are quite painful, but this was a multiple car crash – affecting many different parts of my life at once,” he says. “It took a long time to recover from that.

“I feel I have now – I am older and wiser, probably happier in my personal and family relationships.”

He says words of support from non-partisan constituents have been most valuable, but he also thanks Lib Dem MPs, Mr Clegg and “a lot of people” in the Conservative Party for their backing.

“Michael Gove was very supportive – I am a big fan of his. I think he’s arguably the best education secretary we’ve had in living memory. He is also a very good friend.”

Comeback?

And is he ready to return to Government and work alongside Mr Gove, and his Lib Dem colleagues?

“That’s a matter for the Prime Minister and the Deputy Prime Minister,” he says.

When the long-awaited reshuffles comes later this is year, it is not expected to be radical. The dynamic of having two parties in Government of course makes it harder to have a wide-ranging reshuffle.

Andrew Lansley, the Health Secretary, no longer seems certain to take the next train out of the Cabinet as he did as his NHS reforms were grinding through Parliament. There could of course be a substantial slot in the Department for Culture Media and Sport up for grabs sooner rather later, but that would not seem to make the best of Mr Laws’ talents.

Many Conservatives like the idea of exchanging Mr Laws for Vince Cable, the Business Secretary sometimes referred to as the “anti-business secretary”. However, those close to Mr Cable are adamant that he is “staying put”. It’s certainly not obvious where Mr Laws might end up in a reshuffled Cabinet.

“I am really not standing by the phone waiting for the call,” Mr Laws says. “What’s more important to me, is doing everything I can to ensure that at the end of these five years in Government we have something to be proud of.

“We don’t know if this opportunity to be in government will come back quickly or whether we’ll be out of power for another long time. We’ve got to use this time to make big changes, to make Britain a fairer country, to promote the green agenda and sort out the economic mess we inherited.”

So, he would take the Prime Minister’s call if it came? “I would not slam the phone down on the Prime Minister.”